Figure 8
The following information was extracted from the accounting records of Noelle Company:
Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:

-Refer to Figure 8. Noelle's variable overhead spending (expenditure) variance would be
A) £7,000 favorable
B) £8,000 unfavorable
C) £15,000 favorable
D) £23,000 unfavorable

Question

Figure 8
The following information was extracted from the accounting records of Noelle Company:
Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
  
-Refer to Figure 8. Noelle's variable overhead spending (expenditure) variance would be
A) £7,000 favorable 
B) £8,000 unfavorable 
C) £15,000 favorable 
D) £23,000 unfavorable

Quizplus · Accepted Answer

The formula for variable overhead spending (expenditure) variance is:

Actual Variable Overhead - (Standard Variable Overhead Rate × Actual Direct Labor Hours)

Using the figures in Figure 8:

Actual Variable Overhead = £190,000

Standard Variable Overhead Rate = £6 per direct labor hour

Actual Direct Labor Hours = 31,000

Plugging these into the formula:

£190,000 - (£6 per direct labor hour × 31,000 direct labor hours) = £8,000 unfavorable variance.

Figure 8 the Following Information Was Extracted from the Accounting Records of Records